Some UK stocks are falling this morning (8 June), as investors fret over the Iran conflict and a potential AI bubble. Friday’s super-rized SpaceX IPO has generated huge excitement, but some fear it could inject fresh volatility into markets. So what should investors do?
On any given day, I could produce three reasons why stock markets will crash and three reasons why they could hit fresh highs. Investors have to tune out the short-term noise because the long term matters far more.
Some like to buy defensive stocks when markets are volatile. I think it’s also a good opportunity to buy stocks at the higher end of the risk scale, as they could suddenly be trading at bargain basement prices. These three are worth a look, I feel.
Could IAG fly higher after another sell-off?
British Airways-owner International Consolidated Airlines Group (LSE: IAG) is among the bigger FTSE 100 fallers today, which doesn’t surprise me at all. IAG is a cyclical stock. In difficult periods, its shares struggle. The pandemic nearly grounded the business for good. But in the good times, it tends to fly.
I saw the same pattern after Donald Trump unleashed his tariffs last year. I bought the shares when they were down, and they’ve rallied strongly since.
Today, the valuation still looks attractive with a price-to-earnings ratio of 6.8. That gives investors a much-needed valuation cushion. A wider market sell-off could make it even cheaper. I’d only consider buying with a genuine long-term horizon though, giving it time to fly through temporary storms.
Have you overlooked Lion Finance?
Shares in Lion Finance Group (LSE: BGEO) have soared a stunning 727% over five years. Only Rolls-Royce has done better in the FTSE 100. Yet plenty of UK investors still barely know it exists.
Formerly Bank of Georgia, the business offers exposure to faster-growing Eastern European economies. That creates opportunity, but also serious risk. Georgia remains politically volatile and expansion into Armenia increases that exposure.
On 7 May, the group posted a healthy 14% rise in profits, upped the dividend and extended its share buyback programme.
Even after the huge rally, the stock still trades on a modest P/E ratio of 7.6. Rising energy prices and Iran-driven inflation could hit performance, while those looking at it today may have to accept they’ve missed the explosive early growth phase. Even so, I still think adventurous investors might want to consider it.
Could IG Group thrive on volatility?
I was sorely tempted by IG Group Holdings (LSE: IGG) a couple of years ago, but decided I had enough exposure to the financials sector. Shame though. Its shares have surged 70% in a year.
The trading platform benefits when markets are volatile, as this tempts investors to trade more heavily in shares, currencies and commodities.
Despite the strong run, the valuation still looks reasonable with a P/E ratio of 9.4. IG also generates solid cash flow, holds strong capital reserves and has a trailing dividend yield of 2.6%. It’s also been running buybacks. The group must keep attracting new customers because leveraged trading won’t suit everybody forever. I still think the stock looks worth considering for long-term growth and income. Especially if markets remain volatile.
Should you invest £5,000 in International Consolidated Airlines Group right now?
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Harvey Jones owns shares in International Consolidated Airlines Group.
